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Philip Hammond’s first fiscal event

Monday 28th November 2016

With scary borrowing figures, and a Brexit back-drop, Philip Hammond’s first fiscal event was always going to mark a change.

Having prompted a spread of preserve-related acronyms, the teasers for the Autumn Statement were all about treats for the UK’s JAMs – those who are ‘just about managing’ – such as a ban on letting fees to tenants and an increase in the living wage. However, he didn’t completely chime with Theresa May’s commitment to help struggling families. The Autumn Statement he said was ‘focused on preparing and supporting the economy as we begin writing a new chapter in our country’s history.’

Arguably the biggest announcement came at the end with the revelation that his first Autumn Statement would be his last. Not because he was resigning but because the spring 2017 Budget will also be the last and that autumn 2017 will mark the start of a single Budget each year. A spring statement will follow that will be a response to the Office for Budget Responsibility’s (OBR) economic forecasts, and will contain no announcements. The Chancellor said moving the Budget to the autumn allowed for ‘greater Parliamentary scrutiny of Budget measures ahead of their implementation’ in a new tax year.

With a reputation as being ‘Captain Cautious’ he was never expected to pull a rabbit out of his hat but with a few positives leaked in advance many were left wondering perhaps he might. Well there were certainly some dramatic changes, not necessarily in individual announcements but in the confirmation that plans to have a budget surplus by 2019/20, announced just a few months ago, had been abandoned – although he did announce that he and the Prime Minister were committed to returning the finances to surplus ‘as soon as is practicable … as early as possible in the next Parliament’. Which revealed that he’s certainly not going to announce himself into a corner like his predecessor.

Initially we heard that the International Monetary Fund (IMF) had forecast that the UK would be the fastest growing major economy this year. This was followed by the adjusted OBR forecasts, which showed a dramatic drop in growth for 2017 to 1.4% attributed to lower investment, weaker consumer demand and a drop in the value of sterling – and the vote for Brexit being behind the overall greater economic uncertainty. However, it was also pointed out that this growth figure matched the IMF’s forecast for Germany and was higher than those for France and Italy.

Among other confirmed announcements there was a commitment to spending on infrastructure, particularly the unlocking of a £2.3bn housing infrastructure fund for areas of high demand, and £1.1bn for English local transport networks, reiterating his belief that an unaffordable housing affected productivity and raising productivity was essential to delivering higher living standards.Fuel duty, pensions, the national living wage and the personal tax allowance – all were mentioned in dispatches, as was a ‘whiplash tax’ in the form of an increased insurance premium tax.

So, in an Autumn Statement of only 64 pages (half what it was in 2013), and one that spent many of those pages confirming previously announced measures, it still managed to pack a punch. Here’s our summary of the key points:

OBR growth forecast upgraded from 2.0% to 2.1% in 2016 – then downgraded to 1.4% in 2017. Then 1.7% in 2018, 2.1% in 19/20 and 2.0% in 20/21The effect of the Brexit vote will knock 2.4% off UK growth, according to the OBR

Debt will rise from 84.2% of GDP last year to 83.7% this year and to 90.2 in 17/18

New draft Charter for Budget Responsibility with three key rules: public finances should be returned to surplus as soon as possible in the next Parliament and cyclically-adjusted interim borrowing should be below 2% by the end of this Parliament; public sector net debt as a share of GDP must be falling by the end of this Parliament; public spending must be within a cap set by the government and monitored by the OBR